Thursday, August 14, 2008

Viable project or white elephant?

A. Ranganathan

The Tamil Nadu Government and the Airports Authority of India are going full steam ahead with the Chennai airport expansion plan. While the former seems unaware of the way Chennai airport looked during the monsoon in November 2005, the latter is quoting numbers that are inflated and not based on market forces.

To quote from a recent article in The Wall Street Journal: “Hurt by rising fares, the number of domestic passengers in India rose by only 7 per cent in the 12 months ended April, according to the Airports Authority of India. The growth rate for the previous 12-month period was 31 per cent, and in the 12 months before that, it was 59 per cent. Airlines are cutting routes, idling planes.” Even Mumbai and Delhi, as well as the privately-owned Bangalore and Hyderabad airports, are feeling the heat.

In the early part of this century, when oil was trading at $10, the fare between Mumbai and Delhi was around Rs 9,000 and airlines were making a huge profit. The low-cost carriers came into the picture and brought this down to less than Rs 3,000 and the full-service carriers had to make drastic changes in their fares.

The result is there for everyone to see. You cannot sell cheap tickets to fill up an aircraft and burn costly fuel to fly the passengers to their destinations.

Going by the Wall Street Journal article, it is apparent that projections are made on a single year’s figures, without vision.

Weather conditions and lay of land

Let us analyse the potential for Chennai airport. The airport expansion area is located at a lower level than the main runway and the proposed parallel runway. The main runway elevation is around 13 metres above sea level and the parallel runway will be at an elevation of 11 metres. The current secondary runway is sloped downward from the main runway and it has to cross the Adyar river which has an elevation of 2 metres.

The International Civil Aviation Organisation standards require the runway surface to be at a minimum height of 1 metre over the highest flood level across a water body.

If the secondary runway’s level is not raised sufficiently, it is going to be flooded in any heavy rain condition. It will also mean that aircraft will not be able to reach or use the parallel runway. People have forgotten what happened to Chennai airport during the deluge in 2005.

This becomes a Catch-22 situation. If the AAI does not raise the level of the secondary runway to meet ICAO standards, the secondary runway and the parallel runway will become unusable! If it does raise the level, the cost of the whole project is likely to multiply several times, which has not been budgeted for.

The Chembarambakkam lake overflow is through the Adyar river. If the flow area is restricted by the secondary runway or blocked to a large extent, the flooding on the west, south and south-east areas are going to be extensive.

Growth Projections

The whole programme is based on the inflated growth figures given out by the Ministry of Civil Aviation. Unfortunately, the scene has changed completely, with the rise in oil prices. In an article in April, when crude was hovering around $100 a barrel,

I had pointed out that the airlines are not taking the cost of fuel into account and the projections are likely to crumble. Oil prices are not likely to drop below $100 a barrel in the next year or so.

The airline numbers in India are likely to fall below the 50 per cent mark and the traffic potential in Chennai could drop drastically.

All the airlines in India are in consolidation mode. Air Sahara and Air Deccan have been gobbled up. And it may just be a matter of time before the other smaller airlines are taken over by bigger players. The low-cost carrier concept in India is a misnomer.

Except for the snacks and food, there is no difference in operations costs. One has to pay all the charges — import duty, leasing cost, landing charges, etc.

Cost of Expansion

The AAI has stated that 80 per cent of the Chennai Airport expansion cost will be funded from its own kitty and it will borrow from the market the other 20 per cent. The latest monetary policy spelt out by the RBI is going to make this an expensive exercise.

The AAI has also lost a big chunk of its income source from Delhi, Mumbai, Hyderabad and Bangalore. Even the private players that invested in these airports, based on the inflated traffic projections, are feeling the heat.

There is a question mark as to what will be the recovery period of the high investments. India does not even have a clear cut Civil Aviation policy. It keeps changing, day by day, at the whims and fancies of the Government in place.

Let us take the average aircraft movements in Chennai airport. The AAI pitches for the extension of the secondary runway and the building of the parallel runway, to increase the capacity to 50 movements an hour.

In January 2008, when traffic was at its peak, Chennai had a maximum of 28 movements an hour. This was during the peak hours and for just three hours in a day.

The rest of the day, the average hardly made double digits. It has been pointed out that a traffic capacity of 50 can be achieved with proper air traffic management and efficient ground structure design.

A former senior member of the Airports Authority has stated that Chennai airport, at the present location, is incapable of taking the additional passenger facility for 50 movements in an hour.

So, even if there are runways to cater to aircraft movement, there is not enough space to build the additional infrastructure required to handle all the passengers.

All airlines have cut the frequency of operations. Air travel between Chennai and nearby airports such as Bangalore, Coimbatore and Hyderabad has dropped drastically because of the costs and the time factor.

The door-to-door time taken to travel between Chennai and Bangalore by air takes almost five hours now. The cost has also escalated to almost Rs 6,000, including the taxi fare at both ends.

Train travel, without any hassles of security or baggage allowance, takes just an additional hour and the cost is just a tenth. One can travel very comfortably by the Shatabdi Express for just Rs 600!

Personal egos seem to override logic and reason in Indian aviation. Posterity will tell if the expansion programme of Chennai airport is a viable project or a white elephant.

(The author is an airline captain with 35 years flying experience.)

No comments: